Santiago Iñiguez, Dean of Instituto de Empresa.
A recent piece of US news is a vivid example of the strong shareholder-oriented culture that prevails in its management, as compared to the more stakeholder emphasis that exists among European managers.
General Motors’ (GM) announcement to cut in half its dividend concomitant to the management’s decision to downsize its labour force and reduce both the CEO’s pay (down a 50%) and those of the three Vice-Chairpersons (down a 30% -incidentally, Bob Lutz, one of GM’s Vice-Chairpersons, has his own blog). The rationale behind those cuts in salaries is clear and exemplary: management aims at maximising the return on their shareholders investment and if dividends cannot be sustained or increased, the pain should be distributed right across the company and not just suffered by its shareholders.
Tags(clickable): General Motors, Education, MBA, Business School, CEO, Bob Lutz, GM
In contrast, policies on dividends across Europe are diverse but the extended practice is that managers have wide discretionary powers here. In fact, shareholders are underprotected in many European countries as compared to America in areas like corporate governance or bankruptcy laws. This probably, along with facts such as the public pensions system prevalent across Europe, inhibits the investment propensity among Europeans. Downsizing measures have also more restraints in Europe than in the US and a decision similar to GM’s to downsize its labour force or cut the salaries in order to sustain dividends is just unconceivable in many European countries.
As a consequence of GM’s austere decisions, its CEO’s retribution will be 1.1 million dollars next year, far below those of fellow chief executives at other American blue chips, a fact even more excruciating since GM was once the major company worldwide
I have to say that my purpose here is not judgemental but descriptive. Management educators and executives should be aware, if they aim at running global operations, of the two conceptions of management culture commented here, the shareholder-oriented and the stakeholder-oriented. I believe though that globalisation is fostering convergence towards a model more in line with the American shareholder culture.
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